Private non-financial corporations raised a net $45.8b (excluding derivatives and accounts payable) during the September quarter 2008. They borrowed $27.2b in loans and issued $18.7b in shares. Net issuance of debt securities during the quarter was $0.1b. These transactions resulted in total borrowings outstanding of $865.8b and total equity on issue of $1,051.3b.

During the September quarter 2008, total liabilities of national public non-financial corporations decreased by $0.8b. Liabilities of state and local public non-financial corporations decreased by $0.5b to $137.9b.

Private non-financial corporations debt to equity ratio

From the end of September 2006 to the end of September 2008, the value of equity on issue increased by $83.7b whereas the value of debt outstanding rose by $328.4b. During the current quarter, private non-financial corporation debt increased by $66.6b, while equities on issue decreased by $167.9b. Over the September quarter 2008, the original debt to equity ratio increased from 0.82 to 1.02 and the adjusted ratio increased from 1.59 to 1.60. The adjusted ratio reflects the removal of price change from the original series.

Transactions of financial assets of banks were net $56.6b during the quarter. Banks lent a net $32.2b, of which loans to households were $20.0b, rest of world were $10.6b and private non-financial corporations were $5.0b. Other major transactions in bank assets holdings were: deposits, net $19.3b, of which $6.8b were accepted by the central bank and $7.8b by rest of world; equities, net $4.3b; and bills of exchange, net $2.4b. These were offset by net maturities of bonds of $2.5b.

During the quarter, liability transactions of banks were net $75.3b. There were currency and deposits acceptances of $49.4b, loans of $24.3b, one name paper issuance of $7.5b, and equities issuance of $7.3b. These were offset by bonds redemption of $6.6b, net settlement of derivatives of $4.6b and net repayment of other accounts payable of $2.2b.

Other depository corporations

Transactions of other depository corporations liabilities were net $1.1b during the September quarter 2008, driven mainly by new deposits of $4.5b. These were offset by settlement of derivative contracts, $1.3b, repayments of loans of $1.0b and net redemptions of one name paper of $0.8b. Transactions of assets during the quarter were net $9.5b. The main contributors were deposits of $4.9b, issuance of loans, $3.7b and purchases of bonds, $1.2b.

Life insurance corporations

At the end of September quarter 2008, the financial assets of life insurance corporations were $234.6b, a decrease of $3.6b from the previous quarter. Net transactions were $3.9b and valuation decreases were $7.5b. During the quarter, there were decreases in value of equities outstanding by $7.8b. This was offset by increases in the amounts outstanding of one name paper, $1.0b, and currency and deposits, $0.8b. Pension fund claims against the reserves of life offices decreased by $6.4b following net transactions of -$0.3b and valuation decreases of $6.1b. Households' claims against the reserves of life offices increased by $0.9b following net transactions of $3.2b and valuation decreases of $2.3b.

PENSION FUNDS

Net equity in reserves of pension funds was $1,028.5b at the end of the September quarter 2008, a decrease of $47.4b. This follows net transactions of $9.5b and valuation decreases of $56.9b during the quarter. Asset holdings decreased by $50.3b to $972.4b following net transactions of $5.9b and valuation decreases of $56.2b.

Other insurance corporations

Net transactions in financial assets of other insurance corporations were -$0.2b during the September quarter 2008. The main contributor was the net maturities of bonds of $2.1b. This was offset by net purchases of equities, $0.6b, and increase in holdings of currency and deposits of $0.3b. During the September quarter, net liability transactions of other insurance corporations were $2.1b, driven mainly by prepayments of premiums and changes in reserves of $2.6b.

Central borrowing authorities

Total liabilities of central borrowing authorities was $159.6b at the end of the September quarter 2008. During the quarter, the authorities issued bonds of $2.7b, one name paper of $5.1b, and borrowed $0.3b through loans. Net asset transactions during the quarter were $9.6b, the main contributors being issuance of loans, $10.6b, purchases of one name paper of $0.9b and bills of exchange of $0.7b. These were offset by the withdrawal of deposits of $1.9b.

Financial intermediaries n.e.c.

At the end of the September quarter 2008, net liabilities of financial intermediaries n.e.c. were $424.8b, with shares and bonds on issue of $168.5b and $148.4b respectively, and loan borrowings of $63.3b. Net liability transactions were -$34.4b during the quarter, driven by net maturities of bonds, $14.7b; one name paper, $2.7b; repayments of loans, $10.8b; and equity redemptions, $0.5b. During the quarter, transactions in financial assets were -$9.2b. Major contributors were net maturities of loans assets of $8.1b and redemptions of bonds of $2.0b. These were offset by purchases of equities of $2.3b and one name paper of $0.9b.

Net flow of currency and deposits to banks

Transactions in currency and deposit liabilities of banks during the September quarter 2008 were net $49.4b. There were transactions in currency and deposit assets of households, $19.3b; rest of world, $12.3b; private non-financial corporations, $10.3b; other depository corporations, $4.9b; and pension funds, $3.7b. These were offset by withdrawals of bank deposits by central borrowing authorities, $1.9b; financial intermediaries n.e.c., $1.3b; and other insurance corporations, $0.6b.

CURRENCY AND DEPOSITS LIABILITIES, BANKS

Financial asset portfolio of life insurance corporations and pension funds at end of quarter

At the end of the September quarter 2008, life insurance corporations held $150.4b in shares and other equity (64.1% of their financial assets), of which $122.9b was in resident companies and $27.5b was in non-resident companies; $44.3b in bonds (18.9% of their financial assets), of which $34.2b was in bonds issued by domestic institutions and $10.1b in bonds issued by non-residents; and $15.4b in short term securities (6.6% of their financial assets).

At the end of the September quarter 2008, pension funds held $507.3b in shares and other equity (52.2% of their financial assets), of which $328.6b was in resident companies and $178.7b was in non-resident companies. They held $159.3b of the net equity in life office reserves (16.4% of their financial assets); and $94.0b in bonds (9.7% of their financial assets), of which $49.9b were bonds issued by domestic institutions and $44.1b were bonds issued by non-residents.

Financial claims between households, life insurance companies, pension funds and investment managers at end of quarter

At the end of the September quarter 2008, households had claims against the reserves of life insurance corporations of $58.9b and pension funds of $1,028.5b. Pension funds had claims against the reserves of life insurance corporations of $159.3b. Life insurance corporations invested $142.7b of their financial assets through investment managers, and pension funds invested $455.5b through investment managers.

Financial asset portfolio of other insurance corporations at end of quarter

The graph below shows that at the end of the September quarter 2008, other insurance corporations held $39.0b in shares and other equity (29.4% of total financial assets), of which $29.5b was in resident corporations; $39.6b in bonds (29.9% of total financial assets), of which $35.7b was issued by resident corporations; and $11.1b of short-term securities (8.4% of total financial assets).

Central borrowing authorities net issue of debt securities

During the September quarter 2008, central borrowing authorities issued bonds of $2.8b and one name paper of $5.1b.

Financial intermediaries n.e.c. net issue of debt securities

During the September quarter 2008, financial intermediaries n.e.c. had net redemptions of bonds of $14.7b and one name paper of $2.6b.

GENERAL GOVERNMENT

Summary

During the September quarter 2008, consolidated general government transactions resulted in a net change in financial position of $3.8b.

The net change in financial position for national general government was $6.0b. The liability transactions of national general government during the quarter were -$9.0b, with the main contributors being other accounts payable of -$5.6b and bonds issued domestically of -$3.0b. During the quarter asset transactions for national general government were -$3.0b, with the main contributor being deposits of -$13.0b. At the end of the quarter, national general government had total liabilities of $196.8b and total financial assets of $200.2b.

Transactions in state and local general government financial assets were $0.2b in the September quarter 2008, while transactions in total liabilities were $2.4b, resulting in a change in financial position of -$2.2b. At the end of the quarter, state and local general government had total liabilities of $123.3b and total financial assets of $121.8b.

Change in financial position

National government issue of debt securities

The graph below illustrates that national general governments had net maturities of $3.0b during the quarter.

HOUSEHOLDS

Summary

Households change in financial position was $10.5b during the September quarter 2008. During the quarter, households borrowed a total of $11.5b in the form of loans. On the asset side, householders' transactions in currency and deposits were $20.3b, of which $19.3 were bank deposits. Net contributions to life insurance and pension fund reserves were $12.7b while net claims on unfunded superannuation were $1.1b.

Households sold a net $4.1b in equities during the September quarter 2008, the major contributors being the sale of private non-financial corporations shares, $3.2 and financial intermediaries n.e.c $1.1b.

At the close of the quarter, households' stock of financial assets was $2,217.3b. This was a decrease of $51.9b from the previous quarter, following net transactions of $27.9b and valuation decreases of $79.8b. Major asset holdings were net equity in reserves of life insurance corporations and pension funds of $1,087.4b, currency and deposits of $548.0b, equities of $303.4b and unfunded superannuation claims of $175.3b.

Household net borrowing and debt to liquid asset ratio

Of the net $11.5b loans borrowed by households during the September quarter 2008, bank loans accounted for $20.0b. This was offset by repayments to financial intermediaries n.e.c., $8.6b. Of the bank loans, $15.6b was borrowed for owner occupied housing.

The graph below illustrates that the debt to liquid assets ratio at the end of September 2008 was at 146.9%, an increase of 3 percentage points on the previous quarter. The ratio was influenced by an increase of 1.3% in total outstanding household borrowings and a decrease in total liquid assets of 0.8%. The major contributor to the decline in liquid assets was equities (down 10.4%). This was offset primarily by increases in currency and deposits of 5.4%.

Insurance and pension claims

During the September quarter 2008, households' net equity in reserves of pension funds decreased by $47.4b, made up of $9.5b in transactions and $56.9b in valuation decreases, bringing household net equity in pension funds to $1,028.5b. Net equity in reserves of life insurance corporations increased $0.9b, made up of $3.2b transactions and $2.3b valuation decreases, bringing the household net equity in life insurance to $58.9b. Net transactions in households' unfunded superannuation claims were $1.1b and prepayments of premiums and claims against reserves in other insurance corporations were $1.4b during the quarter.

REST OF THE WORLD

Summary

Non-residents had net transactions of $35.4b in Australian financial assets during the September quarter 2008, resulting in $1,778.1b of Australian financial assets being held by non-residents, up $38.6b from the June quarter 2008. Valuation increases were $3.2b. The main contributors were issuance of loans and placements $37.3b (of which $24.3b was issued to banks, and $17.9b to private non-financial corporations) and net purchases of equities, $14.5b, of which $11.1b was in equities issued by private non-financial corporations. These were offset by net sales of bonds, $17.9, of which $10.1b were in bonds issued by the banks.

Australian residents had net transactions of $24.7b in foreign financial assets during the September quarter 2008. The total value of foreign assets held by Australian residents increased to $1,068.5b at the end of the quarter. Of this, $1.8b were valuation decreases. The main contributors to the increase were net purchases of equity, $11.3b, and the issuance of loans and placements, $9.6b. These were offset by the net redemption of rest of the world bonds issued in Australia of $3.8b.

Net purchases of equities

During the September quarter 2008, non-residents acquired a net $14.5b in equities, an increase of $1.3b compared with the June quarter 2008.

Net purchases of bonds

Non-residents sold $17.9b of Australian bonds during the September quarter 2008, a decrease of $25.8b compared with the June quarter 2008 estimate.

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